Reports from both Fabrizio Romano and The Athletic state that Manchester City have agreed a Deadline Day deal with Chelsea to bring Fernandez to the club.
The £125 million fee matches the record for a British transfer, alongside Liverpool's signing of Newcastle striker Alexander Isak last summer.
Fernandez has now been granted permission to undergo a medical ahead of joining Enzo Maresca's side.
Chelsea are thought to be looking to bring in a replacement, with Monaco's Lamine Camara and Roma's Manu Kone the names heavily linked so far.
Maresca was keen to land Fernandez after the recent sale of influential World Cup winner Rodri to Barcelona, as well as the departures of fellow midfielders Bernardo Silva, Nico Gonzalez and Tijjani Reijnders.
The 25-year-old would partner England's Elliot Anderson and Moroccan Ayyoub Bouaddi in City's revamped central midfield.
Anderson joined for £116 million from Nottingham Forest, while Bouaddi cost £86 million to become the most expensive teenager in Premier League history.
Chelsea manager Xabi Alonso had left Fernandez out of his squad for the last two games as speculation swirled over his potential switch to City.
Fernandez, who signed for Chelsea from Benfica for £106 million in 2023, angered the Blues last season by expressing interest in joining Real Madrid and was dropped for two matches as a result.
The polarising star was sent off in Argentina's World Cup final defeat against Spain in July.
He also angered England fans with his provocative celebration of his country's World Cup semi-final over Thomas Tuchel's men.
Fernandez has won the UEFA Conference League and the Club World Cup in his time at Chelsea.